Term papers writing service

Five forces diagram for the fast food industry in bd

Five external industry forces affecting an organization. Porter in 1979 to understand how five key competitive forces are affecting an industry.

Five Forces example: Fast-food industry

The five forces identified are: These forces determine an industry structure and the level of competition in that industry.

The stronger competitive forces in the industry are the less profitable it is. Threat of new entrants. When more organizations compete for the same market share, profits start to fall.

Porter's Five Forces

Threat of new entrants is high when: Bargaining power of suppliers. Strong bargaining power allows suppliers to sell higher priced or low quality raw materials to their buyers. Suppliers have strong bargaining power when: There are few suppliers but many buyers; Suppliers are large and threaten to forward integrate ; Few substitute raw materials exist; Suppliers hold scarce resources; Cost of switching raw materials is especially high.

  1. After assessing the forces, you have to find ways to affect the forces. Porter's Five Forces Factors.
  2. We have identified the following steps.
  3. Then there is the task of creating unique products to set apart the restaurant from its competitors, which may include multinational chains. Rivalry among competitors is intense when.

Bargaining power of buyers. Buyers have the power to demand lower price or higher product quality from industry producers when their bargaining power is strong. Lower price means lower revenues for the producer, while higher quality products usually raise production costs. Both scenarios result in lower profits for producers. Buyers exert strong bargaining power when: Buying in large quantities or control many access points to the final customer; Only few buyers exist; They threaten to backward integrate ; There are many substitutes; Buyers are price sensitive.

  • The determinant of the low threat of new entrants is the requirement of a number of permissions tough barriers to entry and the established products;
  • Threat of new entrants is high when:

This force is especially threatening when buyers can easily find substitute products with attractive prices or better quality and when buyers can switch from one product or service to another with little cost.

Rivalry among existing competitors.

This force is the major determinant on how competitive and profitable an industry is. In competitive industry, firms have to compete aggressively for a market share, which results in low profits.

Rivalry among competitors is intense when: There are many competitors; Industry of growth is slow or negative; Products are not differentiated and can be easily substituted; Competitors are of equal size; Low customer loyalty.

How does Porter’s Five Forces Model vary from SWOT

Although, Porter originally introduced five forces affecting an industry, scholars have suggested including the sixth force: For example, iTunes was created to complement iPod and added value for both products. But how to use this tool?

Porter’s Five Forces

We have identified the following steps: Gather the information on each of the five forces Step 2. Analyze the results and display them on a diagram Step 3. Formulate strategies based on the conclusions Step 1.

Porter’s Five Forces Analysis

Gather the information on each of the five forces. We have already identified the most important factors in the table below.

Porter's Five Forces Factors.